The policy response to the Asian crisis needed to be adapted to the distinctive features of the crisis. Understanding of the nature of the crisis was less clear when the programs were being formulated than it is now with the benefit of hindsight, but some broad aspects of the situation were apparent from the start. In contrast to the situations in many other countries with IMF-supported programs, the currency crises in East Asia did not reflect substantial fiscal imbalances. Rather, the proximate cause was a liquidity crisis, which called for a large financing package together with other steps intended to restore confidence and catalyze private capital flows along-side the financial support provided by the IMF and the official community more generally. But, at a deeper level, the origins of the crisis lay in serious vulnerabilities in banking and corporate sectors: including exchange and regulatory regimes that encouraged short-term foreign currency exposure, and stock imbalances within these countries, were problematic in conjunction with the volatility of short-term capital flows and external shocks—most notably terms of trade deteriorations and slowing growth of export markets. The programs therefore featured structural reforms that had few precedents in depth and breadth.

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